Part 14: Thoughts On Savings After A Subscriber Hits Back On Paying Off A Mortgage
Don't pressure yourself to save
Today’s installment is as much about how psychology impacts our financial decisions as it is about saving money. So let’s intro it with this before detailing how I view and execute savings.
I received pushback from a subscriber the other day in response to this—
If you had $500,000 left on your mortgage at a payment of $2,300/month, $2,000 in other expenses, $550,000 in savings and work that generates $5,000/month, what would you do?
I would pay off my mortgage.
Save $2,300 each month, resulting in a $3,000/month surplus.
If my work was easy on the body and mind and required only around 20-25 hours a week, I would use $2,000 of that $3,000 surplus to replenish my savings each month. While it would take about 20 years to get back to $550,000, it only takes five years to get to $125,000. Not too shabby.
$125,000 would cover my $2,000 in monthly expenses for more than five years.
That’s how much having no or a super low housing payment means to me.
We had an exchange where he made the sound mathematical argument against what I would do—
I completely, 100% see where Jeff is coming from. I love that Jeff took the time to respond. In fact—in full disclosure—I sent Jeff an email inviting him to write a guest post for the newsletter in response to today’s post. I want different perspectives, even if they poke holes in mine.
I don’t mind being challenged, because the financial choices I make come from me developing an understanding of who I am and how I function best, not how others are and what they do. (More on this throughout and at the end of today’s post).
The only issue I have with Jeff’s response(s) is that he seems unable to see where I am coming from. To suspend his convictions to acknowledge and accept that I’m a different person with different fears, motivations, goals, experiences and, subsequently, concrete responses. It all depends on your perspective and psychological makeup.
How do you feel in one personal financial situation versus another?
Because I feel one way and do certain things in response doesn’t mean you will or should do likewise.
We all have our rationale as we do what works for us, even if it sounds illogical and objectively wrong to others.
To reiterate and expand on my points on why I’d take a lump sum of savings and pay off (or aggressively pay down) a mortgage if I had one—